China hotel industry expected to ride on continued bullish economic growth

CHINA – The 7th Annual China Hotel Development and Financing Conference, organized by Horwath HTL, STR Global and the China Tourist Hotels Association (CTHA), kicked off officially on 28 March 2011 at the Crowne Plaza Sun Palace in Beijing, China. The event has attracted about 600 participants this year, which is 20% more than 2010.

Mr. Zhang Run Gang, President of China Tourist Hotels Association, opened the conference with optimism in the Chinese tourism and hotel industry, while highlighting the challenges, namely rising inflation, labour shortage and increasing labour costs, and the potential impact from the Japan Disaster. This sentiment was seconded by Mr. Liu Shi Jun, Deputy Director General of the China National Tourism Administration. He reinstated that low pay levels in the hotel industry is an obstacle in attracting and retaining talents. He lobbied for industry partners to collaborate on addressing this pressing issue.

Also speaking at the conference was Mr. Stephen Green, Head of Research for Standard Chartered in Greater China. According to Green, China is expected to register a GDP growth of 8.5% in 2011 and 9.0% in 2012, with the Consumer Price Index (CPI) also growing by 5.5% and 3.0% respectively. It is predicted that China will be the world’s largest economy by 2020, and that the country will contribute 23% of global GDP by 2030. In contrast, the bank predicts that the US economy will shrink from contributing 24% of global GDP in 2010 to 12% by 2030. In 2010, the GDP of China grew by about 10.3% and accounted for 10% of the world’s GDP.

According to Mr. Jonas Ogren, Area Director of STR Global Asia, Revenue Per Available Room (RevPAR) of hotels in Asia Pacific rose by 21.3%, after a drastic drop of 19.4% in 2009. Between 2004 and 2008, the rolling Average Daily Rate (ADR) of hotels in China peaked at about RMB 588, but fell by 38% during the global financial crisis. ADR levels in the country are recovering, and the national aggregate is now at approximately RMB 478. In 2010, key markets such as Shanghai, Hong Kong and Beijing witnessed ADR growth of 47%, 32% and 28% respectively; with the significant ADR growth in Shanghai largely credited to the Shanghai World Expo held from May to October 2010. However, he pointed out that occupancy and ADR levels of luxury and upper upscale hotels in Shanghai and Beijing are still trailing behind other key gateway cities in the region, such as Sydney, Tokyo, Hong Kong and Singapore. Ogren added that new hotel developments in China account for about 56% of the 334, 586 new hotel rooms to enter Asia in the next 3 to 4 years, and that hotel room inventory in China will increase by about 16% over this period.